Stolt Offshore S.A. announced that it expects full year 2002 earnings to be below previous guidance due to three factors: operational problems on projects, a timing delay on a major pipelay contract in Nigeria and a continuing weak market in the Gulf
of Mexico. The company now anticipates the year-end results to be
about breakeven.
In addition, the Company announced that Bernard Vossier has requested
to retire from his position as CEO effective immediately. Vossier will continue to serve as a member of the Board. The Board of Directors has commenced a search for a
new CEO and appointed on an interim basis as CEO Niels G. Stolt-Nielsen, a member of the Board since 1999 and currently also CEO of Stolt Offshore's parent company, Stolt-Nielsen S.A.
Operational problems have been experienced mainly on three projects. After completing the detailed engineering study for the installation and tie-in of steel catenary risers in a water depth of 1,245 meters next year on the Shell Bonga project in Nigeria, we are now
forecasting higher than expected fabrication and installation costs.
The company has also seen cost over-runs on the Burullus Scarab and Saffron project in Egypt. These are due to changes in project planning, materials supplied by the customer that were both late and
defective and also difficulties with a nominated sub-contractor requiring additional engineering, management and supervision costs.
On the Conoco CMS project in the North Sea we have experienced
pipeline burial problems.
A delay has occurred on the Offshore Gas Gathering System (OGGS) pipelay project for Shell in Nigeria, due to late delivery of key items by a third party outside of Stolt Offshore's control, which has a negative impact on key asset utilization. Earnings for this project previously expected in 2002 will now fall into the first half of
2003.
The market in both the deep and shallow waters of the Gulf of Mexico has been much weaker than expected this year. The chance of an improvement in Q4 is now thought to be unlikely.
In light of the poor results for Stolt Offshore, the Company's Board of Directors agreed to accept an offer from Stolt-Nielsen S.A., the company's parent, to exchange $40 million principal amount of outstanding debt owed by the Company to Stolt-Nielsen S.A. for 9.4 million Common shares at an exchange price of $4.25
per share. On completion of this transaction the total number of Common share equivalents outstanding will be 93.3 million.